Posted on 03/13/2018 6:22:38 AM PDT by Red Badger
Tensions between Whole Foods Market and some of the most important brands it sells in its stores will come to head on March 19. The grocer notified certain vendors about the meeting last Saturday. A key issue discussed will be Whole Foods' efforts to centralize its merchandising.
Tensions between Whole Foods Market and some of the most important brands it sells in its stores will come to a head on March 19, when they will congregate for a recently announced summit, sources familiar with the situation tell CNBC.
The grocer notified certain vendors about the meeting by email last Saturday. It is set to reassure the brands of relations after Whole Foods' sale to Amazon. It comes after a rocky few months for the grocer, which has been trying to shift from a local orientation to a national one, without sacrificing the selection and relations that set it apart from larger peers like Kroger and Albertsons.
Some of those efforts, like its move to centralize purchases, preceded its sale to Amazon. However, any change the grocer makes is drawing more scrutiny amid the uncertainty following Amazon's acquisition.
Meantime, Whole Foods' limited communication about the status of these changes has been a point of frustration, according to multiple vendors that spoke to CNBC.
A major point of debate for its larger vendors is the new servicing fee, proposed in the last few months, which will charge vendors for Whole Foods' efforts to centralize its merchandising, sources said. Still, some of the sources noted their reliance on Whole Foods as a customer gives them little power with which to bargain.
Traditionally, with both Whole Foods and most grocers, food companies could pay brokers to help manage everything that happens from the grocery stock room to the shelves. The distance from the back room to shelves has been called some of the most expensive mileage on the planet.
These brokers fulfill a number of functions, but their key role is to make sure products are displayed well and taken care of. That could mean anything from making sure there are more granola bars on the shelf when those bars are on sale, keeping the freshest yogurt on the top of rack, or strategically hiding under-stocked goods. Brokers can also use the relationships they wield to make their case for more shelf-space.
Now, Whole Foods wants to control that process, and will charge some companies roughly 3 to 5 percent of sales for the service. The shift was first reported by the Washington Post.
Vendors are not happy. Some say that fee is too high. Others note that being forced to use Whole Foods' systems hurts their relationship with their personal brokers, on whom they rely for the rest of their grocery business. By paying Whole Foods to do the merchandising, vendors have less money and less product to give their brokers that manage relations with other retailers.
Whole Foods hasn't disclosed its reason for shifting to this model, but one key advantage that it could give them is data. Brokers represent multiple brands and work with multiple retailers. Cutting them out of the process means Whole Foods limits the number of people that know what goes on in its stores and who can share that information with others.
Whole Food's parent, Amazon, of course, is a master — and fiercely protective of — its data management.
Whole Foods confirmed it's holding a supplier meeting the week of the 19th, adding that it has nothing more to share at this time. Broader Changes
The changes come as both Whole Foods and the industry it helped launch undergoes transformation.
Organic products are now available in nearly 20,000 natural food stores and nearly 3 out of 4 conventional grocery stores, according to the U.S. Department of Agriculture. That means Whole Foods is competing in one of the fiercest competitive retail environments; the act of simply selling "organic" is no longer sufficient on its own to bring customers into its store.
Many of these brands congregated at the industry's annual largest convention, Expo West, this past week in Anaheim, California. Amid the revelry and morning yoga classes, was a fight for investment, attention and shelf space.
Under that competitive backdrop, few brands said frustrations with Whole Foods were sufficient enough to drive them away from the Austin grocer towards competitors like Kroger, Albertsons and Aldi. The retail environment is too tough and the number of similar rivals too vast.
Meantime, the grocer last Tuesday emailed employees its refreshed core values, a document that CEO John Mackey spent weeks putting together, alongside senior leadership, according to an internal memo obtained by CNBC. Its "statement of interdependence" had last been updated in 1997, according to the document, before that, 1992 and 1988.
The decision to make updates, which referenced Amazon as the company's owner, was driven by Mackey and not Amazon, sources told CNBC.
Who knows what Snakehead's business model is - other than screwing his vendors and his customers. {In that vein, why in blazes did Mackay reward his employees and his customers by offloading his creation to Snakehead and his handlers?} Take a look at Amazon these days - their price diddling has become endemic - avoid them like the plague.
I used to go in the Whole Foods here for a brand of pasture fed, hormone free milk. It reminded me of the dairy milk we used to get fresh when we were kids, and was truly a superior product. It was my only reason to go there and they stopped carrying it about a year ago. Apart from myself, I never saw a single customer in there that didn’t fall into one of three categories:
1. The granola head, patchouli smelling hippies wearing their Peruvian knit caps with tassels and ear gauges.
2. Sweaty spandex clad gym rats stopping by for an organic salad or gluten free, feta cheese pizza on their way home from cross fit.
3. The older woman with more money than sense who would dress up in their finery AND needed to buy the most expensive items so people would see them loading their bags into their Jaguar or MBenz in the parking lot.
I hate to stereotype, but the VAST majority of shoppers in our local Whole Foods can easily be pigeonholed into one of those three categories.
Sounds like you need to take up a hobby.
The solution is to move the food into flying blimps and deliver small orders with gps controlled drones. Mana from heaven! Just use the app, look up and open wide! HaHa!
I've always avoided Whole Foods because of the prices. Unfortunately, Albertson's bought Safeway and now my local stores are joining the organic scam. I refuse to pay a premium for a marketing gimmick.
Sounds like you need to take up a hobby.
I said that from the first announcement.
I've only shopped at Whole Foods a handful of times. But I know a few people who work there (mostly children of friends) and it seems to be a company that tries to make it a place where employees want to come to work. Employees get discounts when they shop there from the beginning (the discount increases after you've worked there a while).
Working in an Amazon warehouse is a brutal job. Two 15-min breaks a day is standard at many places, but the break room isn't a half mile away at most work places. I knew one person who worked at Amazon headquarters and another who currently is and it's brutal there too. Trying to destroy your peers is the name of the game and you pretty much have to put in 18-hr days.
The difference is WF treats employees like people and Amazon treats employees like numbers. Two very different business models.
Hey, it was like going down freakshow alley at the carnival.
For poor Venezuelans, a box of food may sway vote for Maduro:
I do shop at Whole Foods about twice a month. I like their fresh fish and I used to like their vegetables. I went in there a couple of weeks ago and most of the shelves were either empty or only had a few vegetables to pick from. I went to the fish counter and found no marinated fish anymore. I asked the guy behind the fish counter ‘why no marinated fish?’. He said not to worry, he could put teriyaki marinade on a piece of salmon for me. I asked him if he liked all the changes. He said he liked some and he didn’t like other changes. I told him that I could no longer pick the Brussels sprouts that I wanted, they were already packaged up. He said yes, he could understand wanting to pick my own. I haven’t been back since. Maybe Bezos just wanted to kill off the brand. I will go back but only when I am in that part of town.....I do like the sushi chef they have there.
My first real job out of high school was at Kroger Divisional offices in Madison, Wis. I also worked at 3 other grocery chains in my life before being self employed.
CHARGING vendors for selling you their goods?
What a complete & radical change from what I remember.
That used to be called ‘extortion’...................
The average NET NET profit in a grocery chain is about 1 1/2 %. All of these charges will be passed on to the customer.
Another reason to not do any business with either Whole Foods or Amazon.
I knew grocery store profit margins were very slim, so it was shocking to see the 3% to 5% fee that was gonna be collected. That’s crazy...and in an already overpriced store.
As Carl Sagan liked to say; 'It's all star stuff'.
Agree. I much prefer Trader Joe's. Luckily, there's one less than half a mile from the Whole Foods - and closer to my house.
Once you’ve been to Wegmans, Whole Foods is sorta a joke. And Trader Joe’s is great too. No need for WF.
the one in Boulder used to be filled mostly with rich University of Colorado perfesser’s wives and rich University of Colorado female students ... I never saw a more entitled bunch, rushing hither and yon with no concern about bumping or cutting off other folks ... the workers mostly looked like refugees from freak shows in california ...
On one hand, you are correct.
On the other I dislike whole paycheck.
Still conflicted on this one.
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